House prices up but outlook remains clouded

House price growth picked up slightly in August but the outlook for the property market remains “clouded”, latest house price analysis from Nationwide reveals.

Prices were up by 0.6% when compared with July with the average cost of a home standing at £206,145. Whilst prices in August were 5.6% higher than August last year.

Robert Gardner, Nationwide’s chief economist, said: “The pick-up in price growth is somewhat at odds with signs that housing market activity has slowed in recent months. New buyer inquiries have softened as a result of the introduction of additional stamp duty on second homes in April and the uncertainty surrounding the EU referendum. The number of mortgages approved for house purchase fell to an 18-month low in July.

“However, the decline in demand appears to have been matched by weakness on the supply side of the market. Surveyors report that instructions to sell have also declined and the stock of properties on the market remains close to 30-year lows. This helps to explain why the pace of house price growth has remained broadly stable.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said a shortage of property stock was still causing problems for the industry.

He said: “While the increase in prices in August is encouraging and a little surprising, when you look behind the figures it becomes apparent that most of it is based on shortage of stock which we are also finding on the ground. It is important to try to concentrate more on the level of transactions rather than house-price moments, which can give a false sense of security.

“We are finding that an appetite to get on with buying and selling from those returning from holiday has been encouraging lately and we hope that continues into the autumn. People are negotiating very hard to make the deals that are being done happen.”

Jeremy Duncombe, director, Legal & General Mortgage Club, added: “Whilst these figures from Nationwide show a softening in house price inflation, the price of property is continuing to climb at rates well above wage inflation. It won’t be until September’s figures that we’ll be able to get a clearer view of the housing market since the UK’s vote to leave the EU.

“We need to get to grips with the housing crisis sooner rather than later, and that means action from the Government to mobilise the housing industry, both public and private, to build hundreds of thousands more homes. By doing this, we can increase the opportunities for homeownership and build a more hopeful future for aspirational first time buyers.”

Ian Thomas, co-founder and director at LendInvest, said: “That house prices went up last month, despite the post-Brexit uncertainty, is a reflection of the sharp imbalance between supply and demand of property in the UK. The House of Lords Select Committee on Economic Affairs suggested we need to build 300,000 homes a year to have a moderating effect on house prices, but last week’s housebuilding figures from the Department for Communities and Local Government show we are nowhere near that.

“The government must grasp this issue by the horns and do more to encourage homebuilding. It is clear that hoping that the biggest housebuilders will be able to build us out of this crisis is just wishful thinking and grass roots changes are needed.”

And Adrian Gill, executive director, Your Move & Reeds Rains, said: “Whilst the rate of house price growth may have slowed, these figures also show that house prices are continuing their relentless climb upwards.

“Many people forget that a slow-down in the market is normal at this time of year. As such, we shouldn’t necessarily read too much into these figures or see them as a harbinger of a broader decline in the market.

“As we move into the second half of 2016, we will start to get a clearer picture of what the new normal will look like in the UK housing market. Without a doubt, there will be both positive and negative influences to address, but record low interest rates and the perpetual gap between supply and demand will continue to drive house price inflation for the foreseeable future.”